New York financial regulator calls for ‘regulated’ Bitcoin exchanges

Marks the first official government supervision of virtual-currency businesses.

New York’s financial regulator has called on proposals to set up regulated Bitcoin exchanges after the collapse of Mt. Gox.

The Department of Financial Services (NYDFS) wants firms to submit formal applications for exchanges that can be regulated in order to protect consumers after approximately $350m in bitcoins were lost when Mt. Gox was allegedly hacked last month.

It subsequently filed for bankruptcy as Bitcoin users took to the web to claim they had lost vast amounts of cash they had stored with the exchange.

"We will continue to proceed swiftly and thoughtfully to provide rules of the road for reputable virtual currency firms seeking to conduct business on-shore in a responsible manner," he added.

In addition to exchanges, the regulator is also planning to consider applications for other virtual currency firms, including payment processors or storage services.

"Consumers should understand and receive appropriate disclosures about the potential risks associated with using virtual currencies or any other financial product, but the fact is that virtual currencies are unlikely to disappear entirely," Lawsky said.

"They will likely continue to exist in one form or another.

"As such, turning a blind eye and failing to put in place guardrails for virtual currency firms while consumers use that product is simply not a tenable strategy for regulators.

"Our overarching goal is to balance creating appropriate regulatory protections without stifling beneficial innovation in the development of new payments platforms."

The lack of regulation of Bitcoin has sparked concern about its reliability.

Russia has confirmed transactions via the digital currency as illegal, while China banned its banks from dealing with Bitcoin transactions and Singapore has started levying a tax on Bitcoin trading.